Montenegro court agrees to release Terraform Labs founder on $435k bail

A court in Montenegro agreed to release Terraform Labs founder Do Kwon from jail Friday along with another South Korean citizen who also is charged with using forged identification documents in the Balkan country.

The Basic Court Podgorica accepted $435,000 in bail for each of the two suspects pending the outcome of their trial but prohibited them from leaving their apartment, which will be guarded by Montenegrin police, according to a statement.

“They promised … they will not hide until the end of the criminal procedures, that they will regularly answer court summons and that they will be available on the address submitted by their attorney,” the court said.

“If the defendants run away or violate the surveillance measure, the bail will fall through and will be added to the special budget for court work,” the statement added.

Do Kwon, 31, and the other man have pleaded not guilty. Their trial in Montenegro opened Thursday.

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Do Kwon was arrested in Montenegro on an international arrest warrant in connection with a $40 billion crash of Terraform Labs’ cryptocurrency, which devastated retail investors around the world. Both South Korea and the United States have requested his extradition from Montenegro.

South Korea asked Interpol in September to circulate a “red notice” asking the agency’s 195 member nations to find and apprehend Kwon. He and the other man were arrested at Montenegro’s Podgorica Airport on March 23 while trying to depart for Dubai using fake Costa Rican passports, authorities have said.

If convicted in Montenegro of using forged documents, the two could be sentenced to up to five years in prison, which would complicate the extradition requests.

The two are believed to have hid in Serbia but moved to Montenegro after South Korean investigators tracked their whereabouts and asked Serbian authorities to detain them, the South Korean Justice Ministry said when the arrests were made.

Kwon and five others connected to Terraform are wanted because of allegations of fraud and financial crimes in relation to the implosion of the firm’s digital currencies in May 2022.

TerraUSD was designed as a “stablecoin,” a currency which is pegged to stable assets like the U.S. dollar to prevent drastic fluctuations in prices. However, around $40 billion in market value was erased for the holders of TerraUSD and its floating sister currency, Luna, after the stablecoin plunged far below its $1 peg in May.